The following information related to accounting for inventory was taken from the 2019 annual report of Costco Wholesale Corporation.
Merchandise inventories consist of the following at the end of 2019 and 2018.
Merchandise inventories are valued at the lower of cost or market, as determined primarily by the retail inventory method, and are stated using the last-in, first-out (LIFO) method for substantially all U.S. merchandise inventories. Merchandise inventories for all foreign operations are primarily valued by the retail inventory method and are stated using the first-in, first-out (FIFO) method.
Required
Write a brief report explaining the reason(s) that best explain why Costco uses the LIFO cost flow method for its inventories in the United States, but the FIFO cost method for its other inventories.
